Individuals contemplate and complete mergers to create a stronger and better growth future.   In most mergers, a “new” senior leadership team is created.  Like any new team, there can be special opportunities and challenges.  This is especially true when that new team is composed of strong, successful executives who had previously led their “own” firms.  They know the benefits of strategic, tactical, and contingency planning and how to make decisions necessary for growth.  They know how to attract and inspire talent and how to effectively address business problems and issues.  They may have experienced a merger before and understand how important it is to ensure that they first create the foundation for success. One way to accomplish this is for the parties to reach an acceptable agreement in three major areas. 

The Legal Agreement

First, the parties should create a legal agreement.  This document should establish important elements such as percentage of ownership, financial liability obligations, buy-sell options and funding, compliance with legal, ethical, and governmental regulations, and utilization of best practices.  Experience suggests that the legal agreement should be well defined and acceptable to all parties prior to the actual merger.  The attorneys that craft such agreements on behalf of their clients are well versed in all the necessary aspects of a workable legal agreement.  Once agreed upon, there is usually very little need to constantly revisit and revise the document.

The Operating Agreement

The second type of agreement that should be created is an operating agreement.  New partners must reach some level of initial agreement concerning who is responsible for what, when, and how.  For the best start, consensus should be reached on the level of authority an assigned partner has, who he/she must consult with before a final decision is made, and who should be communicated with both before and after a decision.  Ideally, the operating agreement will also contain suggested protocols for the partners to follow when discussing potential changes to the original document or fine-tuning certain aspects as new and better practices are learned.  It is important that the excitement of a new merger doesn’t replace the quality time required to fully complete the operating agreement.  Experience suggests that the actual demands of working “in” the business versus working “on” the business often overshadow the need to revisit and revise this document from time to time.

The Psychological Agreement                                                                                

The third type of agreement should be a psychological agreement. This agreement is designed to help the partners build clarity around how best to utilize their respective strengths through understanding how best to work together as a team. Topics focused on working best together that should be covered include:

• appreciating how best to communicate with each other
• task/talent balancing to bring out the best in each other
• understanding how utilizing one’s strength impacts another person
• recognizing signs of stress in self and others
• developing a mindset and language to deal with all the opportunities and challenges of personality similarities and differences.

Experience suggests that, of the three desirable partnership agreements, the psychological agreement is the one most often overlooked or not discussed in sufficient depth.  The result is a shortfall in the alignment and utilization of the strengths of the “new” partners.  The friction that might occur from this misalignment filters out in the tone of leadership exhibited to the organization and has an impact on the development of the firm’s culture.  A lot of energy can be directed to areas other than ensuring that the firm stays on track for sustainable, repeatable, profitable growth.

Why these Agreements are Important

In addition to potential concerns regarding partner communication, team collaboration, firm growth, and cash flow, other issues can arise with a new partnership. The partners may:

• become frustrated with the situation and/or with each other
• start to question the wisdom of their decision to merge
• exhibit loss of energy and excitement
• focus more on the negative than the positive
• assign blame to others
• struggle with creating a win-win solution

If any of these have been experienced by one or more partner, having these agreements in place can help. It could also be a good indication that it’s time to pause and reflect on how you might want to strengthen your partnership for future success.

Strengthening the Agreements

When issues arise, it could be that the agreements themselves need to be strengthened. Utilizing an outside facilitator can help with adjustments that need to be made. For instance, if the concerns center primarily on the operating agreement, consider having an outside facilitator work with the partners to:

1.  Create or fine tune the operating agreement:
   1. utilizing the concept of unique abilities (identify the intersection of what a person loves to do with what the person does really well)
   2. review the existing task/talent balance to ascertain if other functional responsibilities should be linked or separated
   3. objectively analyze if all the functional responsibilities of leading the business are assigned the appropriate amount of emphasis (the creation of a new team of leaders via a merger does not automatically guarantee that there will be a perfect fit)
2. If the concerns center primarily on the psychological agreement, consider having an outside facilitator work with the partners to:
   1. compile a Birkman Comparative report between each partner to highlight their interests, strengths, needs, and stress behaviors
   2. highlight any significant differences between any pair of partners, and to compile coaching suggestions for each to consider
   3. create a Birkman strengths profile of all the partners for the partners to discuss how best to utilize their respective strengths
   4. identify how each partner’s strengths impact favorably or unfavorably the needs of the other partners

How We’ve Helped Others:

“Carl helped me understand how my tendency to always control the direction of my team’s discussion diminished their buy in.  Prior to that I thought I was being helpful!”

“When I heard Carl discuss the concept of ‘social loafing’ I realized how my attempt to build a strong team was actually having the opposite effect.”

“My motivation was to reflect and consider all options before making a decision.  My partner’s motivation was to immediately execute on the decision.  With the insight provided, we were able to better appreciate our different strengths.”

“Two of my direct reports were struggling with their interpersonal relationship with each other.  We soon discovered that both were operating primarily in stress mode and their effectiveness as a team of two was being destroyed.”

“Our senior group of leaders, comprised primarily of competitive sales personalities, were struggling to form an effective team.  With facilitation from Carl, we were able to focus on cooperating internally and to compete externally.”

“My 50-50 partner and I were totally different in all respects.  We never agreed on anything.  We spent a lot of energy trying to change the other person.  Carl helped us see how unproductive and destructive this behavior was, and we eventually dissolved our partnership.”

“In a presentation Carl Hicks made at an International Conference, he asked the question: ‘What is your option if the golden rule (treat others as you want to be treated) does not apply?’  His suggestion to ‘treat others as they want to be treated’—the platinum rule—made a lasting impression on me.”

“I participated in one of Carl Hick’s Upside-Down Thinking sessions and realized how stuck and perhaps out of date my thinking was when it came to dealing with the different generations in our company.”

“It was a tough lesson for us to learn, but Carl helped my partner and I to understand that we were spending the majority of our time with operating and tactical matters and practically no time with the strategic issues our firm was facing!”